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Lawmakers in Florida have passed a bill that seeks to ban the use of a federal or foreign central bank digital currency (CBDC) within the state, although the governor has acknowledged that the bill is largely symbolic.
In a 116-1 vote, Florida’s House of Representatives has passed a first-of-its-kind bill that seeks to prohibit the use of CBDC as money.
The vote in the House of Representatives follows an earlier vote in the Senate, where senators voted 34-5 in favour of the bill.
All that now remains for the bill to become law is for Governor Ron DeSantis, who has been a vocal opponent of CBDC, to apply his signature.
As covered by VIXIO in March, the bill will introduce amendments to Florida’s Uniform Commercial Code (UCC) so that CBDC is not recognised as legal tender within the state.
In the House of Representatives, the overwhelming and near-unanimous support for the bill may come as a surprise to some observers, given the much less unanimous distribution of seats within the legislature.
Though the Republicans enjoy a supermajority in the House of Representatives, occupying 84 of its 120 seats, the Democrats still hold a sizable share with 34 of the remaining seats.
In other words, nearly all of Florida's Democrat Representatives voted in favour of a bill that the Republican governor has made a centrepiece of not only his governorship, but also his likely run for president in 2024.
Similarly, in the Florida Senate, where Republicans hold 28 seats and Democrats hold 12 seats, about half of the Democrat Senators voted in favour of the bill.
A bill with no teeth
Despite the overwhelming support for the bill among Florida legislators, Governor DeSantis has acknowledged that the bill is largely symbolic.
Last month, in an interview with journalist Benny Johnson, DeSantis was asked about "FedCoin", the unofficial nickname for a US CBDC, and whether his bill could stop it from becoming a reality.
“If Congress ever authorised that,” he said, “that would trump our state law, but I don't think Congress would authorise it.”
As noted by VIXIO in March, for the Federal Reserve to issue a CBDC, it must first obtain majority support from Congress, and with Congress having come under Republican control following last year’s midterms, that support is unlikely, according to Republican sources.
As for the bill’s other goal, the banning of foreign CBDC in Florida, this too would face likely constitutional challenges
According to the Congressional Research Service, previous attempts by US states to sanction or divest from foreign jurisdictions have been overturned on the grounds that they are pre-empted by federal law.
In 2000, for example, the US Supreme Court ruled unanimously that a Massachusetts law restricting state transactions with firms doing business in Burma was pre-empted by federal law.
There is precedent, however, for the federal government to authorise states to prohibit investments in or divest assets from foreign jurisdictions.
In 2007, the Sudan Accountability and Divestment Act granted such powers. Giving states the authority to put similar prohibitions on China, however — the US's largest trading partner — is bound to be more contested.
Making CBDC a campaign issue
Both as governor and as a prospective presidential candidate, DeSantis has drawn attention to CBDC as the leading edge of what he calls the federal “surveillance state”.
According to DeSantis, the issuance of a CBDC would vest in the central bank and the federal government undue powers over the financial lives of individuals and businesses in Florida.
“The Biden administration’s efforts to inject a Centralised Bank Digital Currency is about surveillance and control,” he said when the bill was first introduced.
“Today’s announcement will protect Florida consumers and businesses from the reckless adoption of a ‘centralised digital dollar’ which will stifle innovation and promote government-sanctioned surveillance."
DeSantis also pointed out that, following the introduction of the Florida bill to ban CBDC, the “corporate press” had gone into a “spasm”, accusing him of fear-mongering about something that does not yet exist.
“They haven't done it,” he said, “but Biden is studying it, and what they want to do is have this be the way to get rid of crypto, have a digital dollar and then go to a cashless society.”
Other states and candidates rally against CBDC
Going forward, DeSantis has encouraged other states to pass similar legislation banning the use of federal or foreign CBDCs.
He has also supported efforts, such as those of Senator Ted Cruz (R-TX), to introduce legislation in Congress that would prohibit the issuance of a retail CBDC.
On the Democratic side of the aisle, following the entrance of Robert Kennedy Jr to the 2024 presidential race, the topic of CBDC looks set to feature prominently in the primaries and the presidential election.
Last month, as reported by VIXIO, Kennedy Jr was widely mocked for his comments equating the FedNow instant payments system with CBDC.
But despite the gaffe, Kennedy Jr’s comments suggest presidential hopefuls feel an anti-CBDC position is a potential vote winner.
Several recent polls have put Kennedy Jr in second place for the Democratic nomination, albeit still way behind incumbent President Biden.
